The PG&E plant, slated for San Luis Obispo, Calif., is expected to take up 1 square mile of land and begin generating power in 2010.

"It's going to be the first of many solar-thermal power plants that are going to get built," CEO Robert Fishman said, adding that the company expects to have several thousand megawatts worth of generating capacity in a few years. "The technology has the ability to deploy the most megawatts of any renewable energy that's out there and this is a great start."

Ausra declined to disclose details about the contract, including price, because of a confidentiality agreement.

Boiling Hot Tech

Solar-thermal technology uses the sun's heat, instead of its light, to make electricity. In Ausra's case, a reflector uses the heat to boil water, creating steam that powers generators with no emissions.

Advocates say solar-thermal technology has the potential to make solar power competitive with the wholesale electricity prices that utilities pay for conventional electricity today.

Ausra claims its technology can deliver power at 10.4 cents per kilowatt-hour today and can potentially cut costs to 7.9 cents per kilowatt-hour in three years. That compares with an estimated 16 to 18 cents per kilowatt-hour for other solar-thermal electricity and about 9.7 cents per kilowatt-hour for coal-fired power plants today.

But so far, the technology's been limited to small demonstration plants so far -- even after decades of development.

Because solar-thermal projects compete with wholesale utility prices, they must be large to be economical. And building solar-thermal plants on par with regular power plants requires a large investment that some consider risky because such projects haven't been built before.

Still, the technology is gaining traction. In July, Israel-based Solel Solar Systems announced it was building a large solar park in California after PG&E agreed to buy all 553 megawatts of the park's capacity, and Spain's Acciona Energy closed $266 million in project financing for its 64-megawatt Nevada Solar One project.

Last week, Green Wombat wrote that Brightsource, a solar-thermal startup based in Oakland, Calif., has filed an application to build a 400-megawatt power station in the Mojave Desert and also is negotiating with PG&E.

A Policy-Driven Market

A big driver is the renewable-portfolio standards that some states have passed, which require a certain percentage of utilities' energy to come from renewable sources by a certain date. California aims to get 20 percent of its energy from renewables by 2010 -- a major feat.

Keely Wachs, a spokesperson for PG&E, said the utility sees solar-thermal as one of the most promising technologies to help it reach the standard. The company already gets 12 percent of its energy from renewables, according to a press release.

"We are currently on track to meet, under contract or delivered, the 20-percent renewable-energy goal by 2010," he said. "This agreement is the latest example [that we are committed to] aggressively adding renewables to our energy mix."

While the idea has to have renewables generating 20 percent of the state's power by 2010, "it's impossible to reach the goal" if only plants already in operation are counted, Fishman said.

"PG&E's out there signing contracts for people who can deliver the energy, and I think the [Public Utilities Commission] will see they are trying and they are complying with the spirit of the law," he said.

But contracts don't always translate into energy generation.

According to the California Energy Commission, 12 percent of the renewable-energy contracts signed by publicly owned utilities since 2002 -- when the state's renewable-energy portfolio was established -- have been canceled and another 20 percent have been delayed.

The commission said these contract failure rates are conservative and are likely to increase -- perhaps substantially -- because many of the projects are at such an early stage.

Ausra doesn't plan to be among the failures, Fishman said.

While Ausra doesn't have a large plant in place yet, it already has installed its first megawatt in Australia and is growing that project to 5 megawatts by January and up to 12 megawatts later.

Ausra also is working on installing a 6.5-megawatt project in Portugal that it expects to finish in 2009. And it is building a 5-megawatt demonstration plant in California as a "scale test," Fishman said.

Wachs said PG&E chose to partner with Ausra because the startup has proven technology that works, referring to the Australian pilot plant.

"When PG&E looks at partners, we are looking for proven technology, great leadership and, of course, affordability for our customers," he said. "Ausra fits the bill."

That doesn't mean the utility is closed to other agreements, he said.

"We are continuing negotiations with all companies and we will be looking at all different technologies as a hedging strategy," he said. "From a customer-reliability standpoint, we do need to look at new technologies."

Fishman said multiple projects are needed to meet California's goal.

"The appetite under the [standard] is so large that they are wise to take multiple suppliers," he said. "Frankly, the demand is so large it would be hard for us to supply the whole thing anyway. Just [as with] nonrenewables, they get a variety of suppliers to diversify their portfolio -- that's just sensible business."